![]() This is solid, but it makes it an uphill battle to retire young.Īnother drawback is that index funds generate little cash flow in the form of dividends. Investing $1,000 per month at 8% will get you $1,000,000 in a little over 26 years. No way around it building wealth at 8% just takes time. The first is that the historical long-term return on the S&P 500 is around 8%, including dividends. Index funds are a great way to build wealth over time with almost no effort.īut they do have some drawbacks, especially when trying to achieve financial freedom. All of my tax-advantaged accounts (401k, 529, Roth IRA, etc.) are all 100% invested in low-cost index funds. It takes a bit more work, but it will leave you in a much better position to retire with passive income and higher net worth than the traditional FIRE method.īelow, I’ll show you the numbers on how putting your money and energy into single-family rental houses can leave you in a stronger position to FIRE earlier or FIRE fatter than if you just use index funds.īefore I get the hate mail, let me be clear that I LOVE low-cost index funds. I’m still very interested in building wealth and achieving FIRE (I’m 41 and looking to be ready to pull the plug by 45), but I have an alternative way of doing so that I believe makes life more enjoyable and is easier to do for a traditional family. Not only have I significantly increased my income and reduced my expenses by working overseas, but I get to travel and see parts of the world that most never do (Africa, Asia, South America, etc.). Although I still love to travel and still live overseas, I do so working for a company and stay in one place for four or five years before moving somewhere else. Eventually, however, I settled down, got married, started a family, and took on the traditional responsibilities of adulthood.īeing a nomad (digital or otherwise) with children is no longer appealing. More power to them! When I was young, I wanted to be a nomad (before there were digital nomads), and so I joined the Peace Corps and lived in Africa. What about paying for college for my kids? What about travel and other things that we love? This path is usually followed by young adults seeking a different path, no family, little responsibility. I’m all for early retirement, but do I really want to try to live on $40,000 per year to do it? often relies on retirement accounts that are difficult to access earlyĪs a father of four, I’ve always looked at this advice with one eyebrow raised.it relies on the stock market to always go up or requires you to further cut spending during recessions.at no point do you get to increase your spending if you ever want to increase your spending after retirement, you will run out of money.This path can work for many, but it has some major limitations, in my view: hope the market continues to go up enough so that your withdraws don’t pull down your balance, or you don’t have to cut back even further.retire once the balance in your investments is 25 times what you need to live, without increasing your spending (allows for a 4% withdrawal rate).invest everything in low-cost index funds.reduce your spending to save a massive portion of your take-home pay every month (targeting more than 50%). ![]() The majority of articles I have read about the financial independence / retire early (FIRE) movement proscribe a fairly simple, straightforward plan such as that laid out by Mr.
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